Ocwen Financial Corp., the mortgage servicer under attack for its handling of home loans, is being fired from overseeing debt backing two bond deals, according to notices sent to bondholders.
Wells Fargo Co., the trustee for the transactions, said in letters dated Feb. 24 that a majority of investors had directed it to terminate Ocwen. The bank said that it had issued Atlanta-based Ocwen notices informing the servicer that it was doing so.
Downgrades of Ocwen’s servicing ratings last year triggered technical defaults in the bonds, prompting Wells Fargo to solicit instructions from investors on what to do next. They were also among deals where some bondholders had accused Ocwen of “imprudent and improper servicing practices.”
David Millar, a spokesman for Ocwen at Sard Verbinnen Co., didn’t immediately respond to an email seeking comment. Jen Hibbard, a Wells Fargo spokeswoman, declined to comment.
The bank plans to transfer the servicing to a unit of Credit Suisse Group, according to the notices. Wells Fargo would need to obtain approvals from rating firms for the choices, Nomura analysts including Paul Nikodem and Pratik K. Gupta wrote in a report Thursday.
Ocwen, the largest servicer of loans within mortgage bonds without government backing, has seen its shares tumble 73% over the past year to $9.78.
Since December, the firm has reached settlements with California and New York which criticized it for funneling foreclosure-related business to affiliated entities and mistreating borrowers while facing separate probes from other regulators. Ocwen rejected as “groundless” the claims last month by the bondholder group including Pacific Investment Management Co. and BlackRock Inc. that alleged its practices had created defaults on 119 deals.
Ocwen this month agreed to sell servicing rights on $9.8 billion of government-backed loans to Nationstar Mortgage Holdings Inc. At the same time, New Residential Investment Corp., a company affiliated with Nationstar, agreed to buy Home Loan Servicing Solutions, a firm that helps Ocwen finance its business and co-invests with Ocwen.
A majority of bondholders didnt seek Ocwen’s termination as the servicer on at least eight other mortgage bonds that Wells Fargo asked investors about, according to Nomura.